Tax Free lump sum

dunstonh

I thought the idea was to get a SIPP so that costs are low.

No. The reason to use a SIPP is to access investments that are not available in personal pensions. Things like shares, investment trusts or niche funds etc. However, since A day, over 90% of SIPPs are used for investment funds.

Stakeholder and personal pensions are cheaper than SIPPS for investment funds. This myth that SIPPs are cheaper is a success for the marketing departments of the SIPP providers.

The FSA frowns and has fined companies for doing income drawdown on pension funds of under £100k. Its not an exact rule but the concern is that someone with limited retirement funding shouldnt be taking risks with their retirement income. So, someone with a final salary scheme pension paying £20k a year and a personal pension in drawdown of £50k is not going to to be seen as a problem as its only a small part of their provision. However, someone with no other income and a pot of £50k is going to be seen as a problem.

Historically, costs used to be higher for drawdown cases but that really isnt the case any more as it usually costs between nothing and £300 a year to have a pension in drawdown compared to not.

I take the point about taking cash-free lump sum to invest. As I said earlier, in a cash ISA I would at least get a positive return whereas my pension cash funds are losing money due to either poor asset-backed investments or the management charges outweighing the interest.

That comment straight away tells us you are not suited to a SIPP. The SIPP is for the more experienced investor and not a novice.

You are making a decision based on the investments within the pension and not the pension itself. If you want cash then use cash inside the pension. The same investments held inside a pension or outside of a pension or in an ISA will perform exactly the same.

Before you make a decision you really need to understand investing more than you currently do. Otherwise you could end up making a right pigs ear of it and creating costs or taxation that you dont need to.

EdGasket

'That comment straight away tells us you are not suited to a SIPP. The SIPP is for the more experienced investor and not a novice. '

LOL so you think I should stick with paying management fees to pension funds that can't even run a cash fund with a positive return? I got into 'Cash inside the pension' just prior to the credit crunch so I would not think I'm a novice investor; I should think I have done better than most over the last year. However I object to paying pension management fees for them to lose money on cash funds; hence i want my cash out and into an ISA where I can manage it ! The rest can be in stocks shares index-linked or whatever I fancy. The reason for a SIPP is because it was said earlier in this thread that I could arrange my own drawdown in a SIPP thus avoiding IFA fees.

Why should drawdown be restricted to large funds anyway? If annuity rates are poor then its a sensible option whatever the fund size so you can at least get back what you've paid in.

dunstonh

LOL so you think I should stick with paying management fees to pension funds that can't even run a cash fund with a positive return?

Didnt say that.

so I would not think I'm a novice investor;

Your comments though have suggested a limited knowledge of investments.

However I object to paying pension management fees for them to lose money on cash funds

Not many cash funds have lost money. Although logically, it isnt a surprise that some have. FSCS protection doesnt apply with institutions to the same levels with consumers.

hence i want my cash out and into an ISA where I can manage it !

So you want to replace investment risk with shortfall risk and inflation risk and increase your potential tax burden to your dependents and reduce their retirement income.

The rest can be in stocks shares index-linked or whatever I fancy.

You mean the same investments that can exist in the pension at the same cost or cheaper.

The reason for a SIPP is because it was said earlier in this thread that I could arrange my own drawdown in a SIPP thus avoiding IFA fees.

You are not avoiding IFA fees. If you use invesmtent funds, the charges will be the same. HL, for example, keep the commission for themselves.

Why should drawdown be restricted to large funds anyway?

Logic.

If annuity rates are poor then its a sensible option whatever the fund size so you can at least get back what you've paid in.

Annuity rates are higher than savings rates for over 60s. They are not that poor.

EdInvestor

EdGasket wrote: »

I did look at SIPPS a couple of years back but they couldn't accept my pensions because they contained protected rights contributions. I think this has now changed and they can accept pensions which are partly protected rights?

Correct.

I am confused why the last reply from Mikeey says that drawdown is not worth it if the pension pot is < 100K due to costs?

This does not apply to DIY low cost SIPPs.

As I said earlier, in a cash ISA I would at least get a positive return whereas my pension cash funds are losing money due to either poor asset-backed investments or the management charges outweighing the interest.

Is your pension entirely invested in cash or cash like instruments?If so do you intend to continue along this course? If so you would need to do quite an extensive survey of SIPP offerings as getting a good deal on cash is not easy (especially at the moment).What else might you invest in if you used a SIPP?

Any views on the TD Waterhouse one?

It is competitively priced as a share traders option.

dunstonh

This does not apply to DIY low cost SIPPs.

it doesnt apply, not because of costs, but because DIY means you are able to make your own mistakes without being able to blame anyone else.

Cost has nothing to do with it as you can get cheaper drawdown plans than SIPPs.

EdGasket

If you want a jolly good reason for managing your own pension, then how about this one:
http://www.thisismoney.co.uk/pensions/article.html?in_article_id=443051&in_page_id=6

EdGasket

Reply to EdInvestor: My pensions are currently not in cash because the cash funds just keep losing money BUT I would like the option to save some as cash. In a cash ISA I can get 3% or so at the moment, more for a longer term. That is better than watching the cash pension funds lose money each month.
(My pensions are now mostly Index-Linked gilts plus some corporate bond funds and a small amount in equities)
I was thinking of initially transferring a pension fund of around 46K to a SIPP and seeing how it went. Outside the pension I buy and sell shares so that side of things is not a problem. Any recommendations for a SIPP provider where I can buy gilts and shares and when the time comes, take a cash lump sum with drawdown?

jem16

EdGasket wrote: »

If you want a jolly good reason for managing your own pension, then how about this one:
http://www.thisismoney.co.uk/pensions/article.html?in_article_id=443051&in_page_id=6

They ignored letters from the company concerned when all they had to do was say what they wanted.

If they can't manage to do that how on earth would they be suitable candidates for managing their own pension?

dunstonh

EdGasket wrote: »

If you want a jolly good reason for managing your own pension, then how about this one:
http://www.thisismoney.co.uk/pensions/article.html?in_article_id=443051&in_page_id=6

They couldnt manage a personal pension. How they heck can their manage self investment.

Their story is one of ignorance and not acting on letters telling them what to do. Whilst Abbey Life are rare in that they will buy an annuity rather than defer, they do send out letters at multiple points starting at around 6 months before and then various reminders on what needs to be done.

EdGasket

That still does not give them a god-given right to do what they fancy with client's money; especially after the clients complained and were still not allowed out of the Abbey annuities. Neither could they take the 25% tax-free cash that we all believe we will be entitled to. Its an outrageous scam if you ask me !